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Inside and Outside Money, with an Application to the Russian Virtual Economy

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Author Info
Svetlana Boyarchenko (The University of Texas at Austin)
Sergei Levendorskii (The University of Texas at Austin)

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Abstract

We analyze the endogenous appearance of money substitutes, their interaction with outside money, and resulting distortions in the price system of an economy with large monopolies and wide-spread informal networks. The economy consists of productive, individually optimizing agents and less productive colluding agents who issue universally acceptable money substitutes. We distinguish equilibria by types of exchange both between agents of one type and between those of different types and show that for small trading frictions, only three types of equilibria can be sustained. A novelty of the analysis is that the agents issuing money substitutes survive by their collusion.

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Publisher Info
Paper provided by EconWPA in its series Macroeconomics with number 0405009.

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Length: 22 pages
Date of creation: 11 May 2004
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Handle: RePEc:wpa:wuwpma:0405009

Note: Type of Document - pdf; pages: 22
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Web page: http://129.3.20.41

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Related research
Keywords: money substitutes search collusion trading frictions.

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Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ricardo Cavalcanti & Andres Erosa & Ted Temzelides, 1998. "Private Money and Reserve Management in a Random Matching Model," Macroeconomics 9803008, EconWPA. [Downloadable!]
    Other versions:
  2. Burdett, Kenneth & Trejos, Alberto & Wright, Randall, 2001. "Cigarette Money," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 117-142, July. [Downloadable!] (restricted)
  3. Clifford Gaddy & Barry W. Ickes, 1998. "To Restructure or Not to Restructure: Informal Activities and Enterprise Behavior in Transition," William Davidson Institute Working Papers Series 134, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  4. Stephen D. Williamson, 1999. "Private money," Proceedings, Federal Reserve Bank of Cleveland, pages 469-499.
    Other versions:
  5. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March. [Downloadable!] (restricted)
  6. Blanchard, O & Kremer, M, 1996. "Disorganization," Working papers 96-30, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  7. Wallace, Neil & Zhou, Ruilin, 1997. "A model of a currency shortage," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 555-572, December. [Downloadable!] (restricted)
    Other versions:
  8. S.I. Boyarchenko & S.Z. Levendorskii, 2000. "Search-Money-and-Barter Models of Financial Stabilization," William Davidson Institute Working Papers Series 332, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  9. Cavalcanti, Ricardo de O & Wallace, Neil, 1999. "Inside and Outside Money as Alternative Media of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 443-57, August.
    Other versions:
  10. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "A model of private bank-note issue," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 104-136, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Agapov Stanislav & Boyarchenko Svetlana & Levendorsky Sergey, 2003. "A Three-Sector Model of the Russian Virtual Economy," EERC Working Paper Series 02-06e, EERC Research Network, Russia and CIS. [Downloadable!]
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